About the Company

Manappuram Finance Ltd. is one of India’s leading gold loan NBFCs. Today, it has 4208 (Includes branches of subsidiary companies) branches across 28 states/UTs with assets under management (AUM) of Rs. 166.18 billion and a workforce of 24,717.

 

Q4FY20 Updates

Financial Results & Highlights

Standalone Financials (In Crs)
Q4FY20 Q4FY19 YoY % Q3FY20 QoQ % FY20 FY19 YoY%
Sales 1191 892 33.52% 1133 5.12% 4352 3427 26.99%
PBT 461 314 46.82% 456 1.10% 2672 2209 20.96%
PAT 340 214 58.88% 334 1.80% 1230 790 55.70%

 

Consolidated Financials (In Crs)
Q4FY20 Q4FY19 YoY % Q3FY20 QoQ % FY20 FY19 YoY%
Sales 1618 1167 38.65% 1414 14.43% 5551 4242 30.86%
PBT 534 409 30.56% 544 -1.84% 2007 1457 37.75%
PAT 398 277 43.68% 402 -1.00% 1480 949 55.95%

Detailed Results

    1. The company had a very good quarter with consolidated revenues rising 39% YoY and consolidated PAT rising 44% YoY.
    2. RoA for the quarter came in at 5.7% while consolidated RoE came in at 28.2%.
    3. Total AUM grew 29.8% YoY to Rs 25225.2 Cr while gold AUM grew 30.9% YoY, highlighting excellent growth in AUM from all businesses.
    4. The company has a borrowing cost of 9.46% in the quarter. The cash and undrawn bank lines of the company were at Rs 2300 Cr as of Q4.
    5. The share of new businesses in revenues was at 32.7% in Q4.
    6. The book value per share was at Rs 68 at the end of Q4.
    7. The company also raised incremental borrowing of Rs 3979 Cr through domestic and overseas bon issuances and bank loans in the standalone business.
    8. In the gold loan business, the Opex to AUM has fallen to 6.8% from 7.6% in the last quarter while security costs have gone down 53.9% YoY.
    9. Gold AUM per branch rose significantly to Rs 4.81 Cr per branch vs Rs 3.84 Cr per branch a year ago.
    10. The standalone business has GNPA and NNPA of 0.9% and 0.5% respectively while maintaining a CAR of 23.4%.
    11. The online gold loan’s share of total gold AUM has gone up to 48% in Q4.
    12. In Asirvad MFI, AUM grew 43.3% YoY while delivering 25.5% RoE for FY20.
    13. The GNPAs for Asirvad has risen to 1.56% in Q3 vs 1.34% in Q2. The NNPA is still due to the company’s good provisioning. Asirvad maintained a CAR of 25.4%. The subsidiary made a COVID-19 provision of Rs 50 Cr.
    14. Asirvad has undrawn bank lines of Rs 1760 Cr and excess cash of Rs 1190 at the end of Q4. 100% of loans qualify for PSL.
    15. Asirvad now boasts of 1042 branches and a customer base of 2.37 million vs 1.8 million a year ago.
    16. The Housing and Vehicle finance divisions have shown good AUM growth of 21% and 20% YoY respectively.
    17. % of digital collections for Manappuram were at 72% while for Asirvad it was 9%. The digital tracing of MFI customers was at 94%.
    18. The company has announced a dividend of Rs 0.55 per share in the quarter bringing its dividend for FY20 to Rs 2.20 per share.

Investor Conference Call Highlights

  1. The company saw a gold tonnage growth of 7.2% YoY in FY20.
  2. At the portfolio level, the average LTV is less than 50% against the target limit of 75% showing significant room for borrowing for customers against their collateral.
  3. The management has stated that Asirvad Microfinance follows strict guidelines for diversification of risks like a 10% lending cap on states and a 1% lending cap on districts with an aim to reduce the district cap to 0.5% in the next three years. This has enabled the MFI to be able to minimize geographical concentration risk.
  4. Asirvad also has the lowest operating expenses in the industry according to the management.
  5. The commercial vehicle finance division saw higher GNPL mainly due to the auto industry slowdown which was further exacerbated by the lockdown for COVID-19.
  6. During Q4, the company consciously chose to reduce lending to smaller NBFCs and MFIs given the current macro environment.
  7. In the current environment, the company is focussing on digital collections and customer communications.
  8. The average goal load size and duration were Rs 38,500 and 58 days respectively. Most of the gold loan customers did not opt for the moratorium.
  9. Asirvad was rated AA- by CRISIL which is the highest rating in the MFI industry at present.
  10. The company has reduced the CP ratio to 11%.
  11. Only 100 gold loan customers have applied for a moratorium as of April.
  12. Despite the loss of business due to the lockdown, the management remains confident of achieving 10% revenue growth in FY21.
  13. The total value under moratorium for the vehicle finance division is Rs 130 Cr.
  14. The consolidated cash position of the company is Rs 2500 Cr in cash and Rs 1500 Cr in undrawn lines.
  15. The company was disbursing around Rs 700 Cr every day.
  16. The management has stated that the majority of customers in the vehicle finance business are 1-2 vehicle owners and thus this customer set should be in a more advantaged position as compared to fleets and wholesale customers. In this division, 10% of customers applied for the moratorium.
  17. After COVID-19, the bounce rate on gold loans has gone up 18-20%.
  18. The online gold loan business has seen good traction since the lockdown started and it has witnessed a portfolio growth of 10-12% already.
  19. The management expects almost 70% of gold loan volumes to shift to online by the end of Fy21.
  20. In the 1.5 months since 1st April, the company has disbursed Rs 20,000 Cr.
  21. The management has clarified that Manappuram does not provide any corporate guarantee for any of the subsidiaries’ borrowings and all of them raise debt on their own.
  22. The management has stated that employee costs in Asirvad have gone up almost 50% YoY mainly due to the company opening up more than 100 branches in FY20. As a percentage of revenues, Opex is kept below 5% which is very good for an MFI.
  23. The company has managed to reduce back-office costs of Rs 20-25 Cr per year. This was done mainly through outsourcing various back-office tasks. For example, the company has outsourced infrastructure management to IBM.
  24. The main focus of cost savings from an online gold loan is that it shall reduce the number of employees required to run a branch. The management believes that the current number of employees in branches can handle up to Rs 15 Cr per branch as opposed to the current Rs 5 Cr per branch.
  25. The company will institute a 100% bank disbursal in Asirvad from August 17 onwards.

Analyst’s View

Manappuram Finance has long been one of the most consistent players in the NBFC sector in India. The company has cemented its position as one of India’s gold loan providers in India by growing its core business consistently. The company’s current quarter performance has been very good with >20% YoY AUM growth across all segments. The rise of Asirvad in FY20 has been particularly good. The company has done well to emphasize good risk management for the MFI unit by capping lending % at both state and district level. The company has also seen good traction in the online gold loan which is expected to keep growing even faster in current times of COVID-19 disruption. It remains to be seen how the company’s collections will be affected once the quarter ends and collection for disbursals in FY21 starts. Nonetheless, given the company’s resilient customer base and gold loan AUM along with the rising star among MFIs in India Asirvad Microfinance, Manappuram Finance seems like a pivotal finance stock to watch out for.


Q3 2020 Updates

Financial Results & Highlights

Standalone Financials (In Crs)
Q3FY20 Q3FY19 YoY % Q2FY20 QoQ % 9MFY20 9MFY19 YoY%
Sales 1133.3 900.93 25.79% 1077.29 5.20% 3161.1 2534.61 24.72%
PBT 456.42 333.88 36.70% 427.55 6.75% 1219.38 903.41 34.98%
PAT 334.06 211.91 57.64% 336.17 -0.63% 890.54 576.88 54.37%

 

Consolidated Financials (In Crs)
Q3FY20 Q3FY19 YoY % Q2FY20 QoQ % 9MFY20 9MFY19 YoY%
Sales 1414.25 1100.81 28.47% 1334.09 6.01% 3933.04 3075.51 27.88%
PBT 544.36 387.83 40.36% 514.44 5.82% 1473.23 1047.15 40.69%
PAT 402.23 247.14 62.75% 407.65 -1.33% 1082.11 671.14 61.23%

 

Detailed Results

    1. The company had a very good quarter with consolidated revenues rising 28% YoY and consolidated PAT rising 63% YoY.
    2. RoA for the quarter came in at 6.3% while consolidated RoE came in at 30.4%.
    3. Total AUM grew 35.5% YoY to Rs 24099 Cr while gold AUM grew 29.7% YoY to 16243 Cr, highlighting excellent growth in AUM from all businesses.
    4. The company has a borrowing cost of 9.12% in the quarter. The cash and bank balance of the company rose to Rs 2196 Cr.
    5. The share of new businesses in revenues was at 32.6% in Q3.
    6. The company also raised $300 million via its US dollar medium-term note which was subscribed 3.8 times.
    7. In the gold loan business, the Opex to AUM has fallen to 7.6% from 8% in the last quarter while security costs have gone down 51% YoY.
    8. The standalone business has GNPA and NNPA of 0.5% and 0.2% respectively while maintaining a CAR of 23.4%.
    9. The online gold loan’s share of total gold AUM has gone up to 44% in Q3.
    10. In Asirvad MFI, AUM grew 57.2% YoY while delivering 26.8% RoE.
    11. The GNPAs for Asirvad has risen to 1.34% in Q3 vs 0.86% in Q2. The NNPA is still due to the company’s good provisioning.
    12. The company has announced a dividend of Rs 0.55 per share in the quarter bringing its dividend for the 9M period to Rs 1.65 per share.

Investor Conference Call Highlights

  1. The rise in gold loan AUM was a result of a combination of increase in gold holdings of 11% YoY and higher gold prices.
  2. Despite growth being driven by new customers, the average ticket size for the company has remained around historical levels of Rs 22000. All disbursals were done using non-cash methods.
  3. Asirvad Microfinance was awarded AA- by CRISIL which is the highest rating for anyone in the Indian MFI sector.
  4. The vehicle finance business saw AUM growth of 43.2% YoY to Rs 1397 Cr with NPA at 2.87%.
  5. The home loan business saw AUM growth of 25.8% YoY to Rs 601 Cr while the loans to corporates saw AUM decline of 12.8% QoQ to Rs Rs 667 Cr.
  6. The company’s presence in Assam is very small with a book of only 47 Cr where only NPA is around only Rs 43 Lac.
  7. The number of vehicle finance branches has gone down due to the consolidation of a few locations into a single branch.
  8. The company is targeting to shave off another 100 bps from the current Opex to AUM ratio by next year.
  9. The management expects tonnage to increase by 3-4% in the quarter. The current LTV is around 61%.
  10. The company is very particular about risk management, especially in Asirvad. It has instituted lending caps of a maximum of 10% for all states as a risk management measure. It has also moved to district level risk exposure.
  11. The company has also consciously kept the ticket size limited to Rs 45000 as a measure of risk management.
  12. And the final measure of risk management that the company practices is to keep lending ticket size in new regions capped at 25000-30000.
  13. The company has also mandated that a borrower cannot have more than 3 loans (2 MFIs + 1 bank) including the companies at a time.
  14. The accrued interest as of Q3 has been around Rs 512 Cr.
  15. The management has stated that the total possible exposure of the company to the affected districts in Karnataka is around Rs 36 Cr. Out of this possible Rs 36 Cr the company has already made provision of Rs 15 Cr.
  16. In the CV loan business, the management expects GNPAs to stay at current levels and it does not expect any additional stress to appear in this business area.
  17. Around 50% of the gold loan book is in ticket sizes of above Rs 1 lac.
  18. While expanding into a new state, the company follows a hub and spoke model where it chooses a central district to expand into first after which it expands into other neighbouring spokes once the central hub for the region is consolidated. In most cases, the company will try and choose the most beneficial district in the state for its hub. The hub district does not need to be contiguous to every other district necessarily.
  19. In the CV loan business, around 87% of the book is for used-vehicle finance. Around 35% of the book is in South India while North and West count for 27% each and the East has around 115 of the book.
  20. The management has stated that the company has been working hard on keeping costs for physical security guards capped while investing in electronic security and cellular safes which have helped the company increase volumes per branch while keeping security costs capped to a certain extent.
  21. Due to the GNPAs rising QoQ for Asirvad and the entire industry as a result of various reasons like natural calamities, political disruptions, etc; the management had taken the decision to increase provisioning to 1.5%.
  22. The management has guided that the company is looking to target tonnage growth of 10% to 18% in the next 2 years.
  23. The management has stated that around 60% of the company’s customers are new to credit (They have no credit bureau records).
  24. In case of home loan customers, most of them are not first-time borrowers and so they will be having credit scores. Thus the company is able to mandate a minimum credit score for customers of this segment as a risk management measure.
  25. The management has mentioned that the NPAs in the microfinance segment can be expected to stay elevated at current levels as there are always some disruptive event like natural disasters, etc which are going in some region of the country which may cause a slight drop in collection efficiency in those regions thus pushing NPAs up.
  26. West Bengal is the 2nd largest state for Asirvad with a book of around Rs 650 Cr and a NPA figure of Rs 10 Cr.
  27. In the vehicle finance business, the rejection rate for 2 wheeler applications is around 10% while the rejection rate for CV applications is around 25%.
  28. The rejection rate in the home loan business is around 40%. Once sanctioned, around 20% of the sanctioned loans are rejected due to legal and other reasons connected to the property in question.

Analyst’s View

Manappuram Finance has long been one of the most consistent players in the NBFC sector in India. The company has cemented its position as one of India’s gold loan providers in India by growing its core business consistently. The company’s current quarter performance has been very good with >25% AUM growth across all segments. The company has done well to balance its efforts and expand both its core business of gold loans and other businesses like Microfinance and vehicle finance and consistent pace all the while keeping NPAs in check. Asirvad’s performance for the quarter also has been very good and the company has been able to keep the rise in NPAs at a much lower level than the industry due to its good risk management practices. It remains to be seen whether the company will be able to achieve its ambitious fold tonnage growth target of 10-18% for the next 2 years. Nonetheless, given the company’s market positioning and its history of consistent performance across all operating segments, Manappuram Finance remains one NBFC stock that all investors should keep an eye on.

 


 

Q1 2020 Updates

Financial Results & Highlights

Standalone Financials (In Crs)
Q1FY20 Q1FY19 YoY % Q4FY19 QoQ %
Sales 950.5 702.79 35.25% 892.56 6.49%
PBT 335.3 265.65 26.22% 314.32 6.67%
PAT 220.3 171.15 28.72% 213.57 3.15%

 

Consolidated Financials (In Crs)
Q1FY20 Q1FY19 YoY % Q4FY19 QoQ %
Sales 1184.69 947.18 25.08% 1103.32 7.38%
PBT 414.43 309.38 33.96% 380.12 9.03%
PAT 272.22 199.99 36.12% 258.33 5.38%

 

Detailed Results

    1. The company had a good quarter with consolidated revenues rising 25% YoY and consolidated PAT rising 36% YoY.
    2. RoA for the quarter came in at 5.1% while consolidated RoE came in at 23%.
    3. Total AUM grew 21.5% YoY while gold AUM grew 6.6% YoY highlighting excellent growth in AUM from other businesses.
    4. In standalone terms, the cost to income ratio fell to 30.8% from 35.7% a year ago. Security costs also fell to Rs 15.4 Cr from Rs 35.4 Cr.
    5. In Asirvad MFI, AUM grew 72.2% YoY while delivering 25% RoE.
    6. Vehicle & Equipment finance AUM grew 70% YoY.
    7. Housing Finance AUM grew 33% YoY.
    8. The company had a well-matched ALM profile with undrawn bank lines of Rs 1070 Cr.
    9. The company also raised $75 million of long term borrowings from IFC with a 3-year tenure.
    10. The marginal cost of borrowing for the company came down 9 bps to 9.25% in Q1.
    11. The company maintained a CAR of 23.3% in Q1.
    12. Gross NPAs for the company in Q1 was at 0.7% while net NPAs came in at 0.4%
    13. Gross NPAs for Asirvad MFI was at 0.68% while net NPAs were at zero.
    14. The company has announced a dividend of Rs 0.55 per share in the quarter.

Investor Conference Call Highlights

  1. The company expects the gold loan growth to pick up in Q2 driven largely by tonnage. The company has also noted that average LTV on the gold loan book was ta 62% and customers were not necessarily borrowing the whole 75% against their gold deposit value.
  2. Asirvad finance has emerged as a major contributor to the company. The management is evaluating a primary fundraise in this subsidiary for $ 85 to 100 million.
  3. The company expects its vehicle finance division to be the third great growth contributor after gold loan and microfinance.
  4. The costs to assets ratio for the company fell to 7.8% from 8.15% a year ago. The company has also maintained Rs 80 Cr of surplus provision as well.
  5. The transition to IndAS 116 has had a positive impact in PBT of Rs 4 Cr.
  6. The management hopes to maintain their credit costs at current levels in the rest of the year and in FY21.
  7. The management reassures that they have ample liquidity from their existing bank lines and also have additional sources like IFC and NABARD in case of additional requirements.
  8. In terms of liquidity policy, the company maintains at least 5% in liquid assets at all times.
  9. The company’s AUM exposure to flooded areas this year was only 2-3%.
  10. The management expects gold tonnage to increase by 10% and gold AUM to grow 12-15% in FY20.
  11. The company has admitted that their gold tonnage is not growing as fast as the competition but they are not concerned with this as they are not focusing on aggressive expansion of the gold loan AUM as they have to be able to maintain excess liquidity at all times and their target is for consolidated AUM growth of more than 20% which they expect to achieve this year.
  12. The management has admitted that asset quality is a challenge in the housing finance division. They are trying two different approaches to resolve this. One is to sell stressed assets and bring down the level of stressed assets in the book. The other is to progressively reduce ticket sizes and LTV. The company has also launched a micro-home loan product with LTV as low as 30% and yield lease at 21.5% to bring up yields and lower LTVs for the portfolio. The company has also seen ticket size come down from 13-14 lacs to 8.42 lacs currently.
  13. The company shall allocate 50% of its capital for gold loan, 20% for micro mortgages in affordable housing and SME loans, 15% for vehicle finance and 10% for microfinance.
  14. In housing finance, the company is mainly present in the West and South of India. The NPA levels for this division have been at 4.3% which is expected to come down to nearly 2% by the end of the year once the stressed assets in this division are slowly sold off.
  15. In vehicle finance, 70% of the loan book is for commercial vehicles while 25% is in two-wheelers and 5% in passenger cars and farm equipment. Within this commercial vehicle loan book, 85% is for used commercial vehicles and 15% for new commercial vehicles.
  16. This division is very exposed to the South of India and Kerala exposure is about 40% of the division’s portfolio. The company has identified Rajasthan and Madhya Pradesh for expansion of this division. The company plan to set up a foothold in the micro home loan market and gradually increase their ticket size.
  17. In the SME loan book, the company has an exposure of Rs 850 Cr among 56 companies.
  18. The gold price movement brings down the LTV for the gold loans.
  19. The company is yet to start on its plans for insurance operations. They are currently looking to build their team and they plan to submit their license application by the end of the year.
  20. The average loan life for gold loans is 72 days. In almost 2/3rd of all cases, the company sees the borrower close their loan within the 3-month tenure set in the loan. Only 1/3rd of borrowers go for resetting for another 3 months.

Analyst’s View

Manappuram Finance has long been one of the trailblazers in the NBFC segment catering to personal finance in India. They have a robust and resilient gold loan business forming the nucleus with many other business divisions like microfinance, housing finance and vehicle finance as other avenues for lending. The company has done well to develop these divisions particularly the microfinance division. The company has also maintained a healthy liquidity profile and is also planning to expand into life insurance operations of its own given its wide distribution network. It remains to be seen how long they shall continue to stay immune from the ongoing liquidity situation in the NBFC space and whether their plans for restructuring their stressed assets in the housing finance division will go as planned. They need fund-raising for the capital infusion required to expand their microfinance division and launch their life insurance operations. In the current economic environment, it may be a tough ask to raise funds. Nonetheless, based on their consistent historical performance and their success in raising different business lines other than their flagship gold loan business, Manappuram Finance continues to be a good stock to keep an eye out for, particularly given their resilience in the current economic conditions.

 


 

Q3 2019 Updates

Financial Results & Highlights

Standalone Financials (In Lacs)

Q3FY19 Q3FY18 YoY % Q2FY19 QoQ % 9M FY19 9M FY18 9M% Change
Sales 90094 74355 21.17% 85087 5.88% 253461 219993 15.21%
PBT 33389 26106 27.90% 30387 9.88% 90341 80213 12.63%
PAT 21192 16904 25.37% 19380 9.35% 57688 52271 10.36%

Consolidated Financials (In Lacs)

Q3FY19 Q3FY18 YoY % Q2FY19 QoQ % 9M FY19 9M FY18 9M% Change
Sales 110081 88154 24.87% 102752 7.13% 307551 257798 19.30%
PBT 38784 26536 46.16% 34993 10.83% 104716 76132 37.55%
PAT 24716 17122 44.35% 22400 10.34% 67115 49586 35.35%

Detailed Results

    1. The company has delivered a strong growth of 24% YoY in revenues on a consolidated basis.
    2. The corresponding PBT and PAT has been phenomenal with growth of 46% and 44% respectively in YoY basis.
    3. They have maintained a robust consolidated ROE of 23%.
    4. Standalone gross NPA has declined to 0.6% compared to 0.7% last quarter.
    5. Their biggest segment, the gold loan category has seen a YoY growth of more than 10% keeping pace with organized gold loan market which has been estimated to grow at around 10-12% pa.
    6. Gold loan yields has seen an improvement in current quarter because of withdrawal of discount schemes and passing on the increase in borrowing costs to the end customers.
    7. This was also the first quarter when all of the lending product categories reported profits on a standalone basis.
    8. Their Ashirvad subsidiary dealing in personal finance has grown phenomenally with 41% increase in revenues and a rise of 52% in net interest income compared to last year while delivering a robust ROE of 29.4% in the current quarter.
    9. Ashirvad Microfinance been growing their AUM at a CAGR of 65.8% p.a. for the last 4 years. They grew 17% QoQ and 51% YoY in AUM.
    10. They continue to maintain a well matched ALM profile and have undrawn banking lines of Rs 19,240 million to maintain sufficient liquidity.

Investor Conference Call Highlights

  1. For the first time, all product categories have reported standalone profits.
  2. The company is planning to raise equity for Ashirvad Microfinance in the near future with an expect dilution of around 15%.
  3. The cost of borrowing has increased by around 50bps to 9.75% which was passed to customers mainly due to withdrawal of rebates.
  4. The online gold loan business line is staying robust and now accounts for 36% of total gold loan portfolio.
  5. The management expects the AUM mix of gold and non-gold sectors to reach 50-50 ratio in the near future after a few years.
  6. Manappuram is also planning to infuse around Rs 100 Cr into their housing finance division.
  7. In housing finance division, the company aspires to double their current AUM and scale up at a faster rate than before.
  8. Management is targeting an overall gold loan AUM growth of 15% YoY. The growth for the current year till date has been 10.6% which is expected to catch up to make for the slack in the next quarter.

Analyst’s View

Manappuram Finance has long been one of the early entrants in the NBFC segment catering to personal finance in India. They have a robust and resilient gold loan business which is still growing double digits every year. Other than their flagship gold loan business, they have also branched out into other personal finance lending business lines. Leveraging their large customer reach and target market, they have been growing these segment at an exponential manner. Manappuram seeks to establish itself as a one stop solutions providers for all the borrowing needs that a retail customer may have. Despite the recent tightening in the NBFC segment, Manappuram has had no problems raising funds for its business, thus highlighting their robust risk profile and stellar market reputation. However, in the current difficult environment, it remains to be seen whether the liquidity problems in the housing finance sector will spill over to other NBFCs like Manappuram as well or not.

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